Wednesday, November 01, 2006


Until I started researching the MoneySense Book, I believed that the rich got richer and the poor got poorer. I supose those of us who are not yet rich, tend to think that way. During my research I uncovered the most amazing fact and I will call it The Magic of Compound Interest.

If you were like me, you probably believed that if you got twice the interest on your savings, it would only make the amount at the end twice as much. Well this is not the case!

You also probably believe that if you leave your savings in for twice as long, you will get twice as much at the end. Well this is not the case either!

The cost of waiting to start your investment program can be a huge amount of money. I can show you this in two ways. Firstly, how much do you think you need to save a month to set aside $100,00, starting at various ages. (%12)

At age 25 just $10.22 per month
At age 35 it is $32.46 per month
At age 45 it is $108.71 per month
At age 55 it is $446.36 per month

If you invested $1 a day, earning 12% you would get:

$116,858 if you started at age 30,
$264,403 if you started at age 26,
and you would get
$296,516 if you started saving at age 25

Makes the mind boggle doesn't it?

If you use the magic of compound interest it is possible for any Australian to retire finacially secure.

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